Eye on the News

Steven Malanga

The Tort Plague Hits Wal-Mart

A federal judge dignifies a flimsy claim.

June 24, 2004

Earlier this week a San Francisco federal judge ruled that a lawsuit by a handful of Wal-Mart female employees should be transformed into a massive class action case on behalf of 1.6 million women who worked at Wal-Mart over the last eight years. In rendering his decision, Judge Martin Jenkins called the case historic.

But critics of our civil justice system wouldnt call the case historic so much as sadly typical of the current state of U.S. employment law. The suit is based on individual cases that reveal little more than the frustrated ambitions of underperforming or unpopular workers, backed up by dubious statistical analysis and tortured logic that binds together contradictory arguments by the thinnest of threads.

The case began as individual claims, which the legal team, led by the trial firm Cohen, Milstein, Hausfeld and Tollspecialists in suing big companieshas fought to elevate into class action status in order to win a potentially big payday from Wal-Mart. To read the individual stories of the original plaintiffs of this lawsuit is to get a lesson in how employment law has been degraded to the point where aggrieved employees who have been disappointed in their careers regularly claim discrimination and suebased on nothing more than the fact that they have not been promoted.

The first plaintiff listed in the case, Betty Dukes, who was featured in a New York Times story about the suit, is a black woman working in a California store who testifies that she clashed with a female Wal-Mart supervisor, was disciplined for admittedly returning late from lunch breaks, but nonetheless claims that Wal-Mart passed her over for promotions because she is woman, though she offers not a shred of evidence of discrimination. The suits second plaintiff, Stephanie Odle, was a management trainee denied promotion after being suspended for what her supervisors claim was improper handling of a refund to a customer. She claims, with no supporting evidence, that the suspension was concocted in a plot against her. Odle offers a long list of conflicts she had with Wal-Mart supervisors, and asserts that somehow all her troubles resulted from the fact that she was being discriminated against as a woman. While other cases involve accusations by women that supervisors, including female supervisors, made disparaging remarks about women workerssomething entirely possible in a company of more than 1 million employees (and individually actionable)there is nothing in this collection of anecdotes that amounts to a company-wide pattern of discrimination.

Since these individual cases rest on little evidence of actual discrimination, the plaintiffs must show that what has happened to them represents a pattern of company-wide abuse. Their arguments on this issue should strike fear into the heart of the average corporate executive. Central to the plaintiffs case is the contention that Wal-Mart is a heavily decentralized company, in which managers are given wide latitude to make hiring, pay, and promotion decisions. This, the lawyers argue, is a bad thing, because it leaves too much discretion in the hands of store managers, who can thus be influenced by their own negative stereotypes.

Under this scenario, decentralization in management, which has been one of the core productivity-boosting principles of American business in the last two decades, becomes something that companies must avoid or limit. Incredibly, the plaintiffs lawyers even quote disapprovingly a Wal-Mart store manager who says he relies on teamwork, ethics, integrity, and the ability to get along with others in making promotions. Such unwritten, subjective criteria, the lawsuit states, are particularly vulnerable to the influence of stereotypes. Of course, only in the moral netherworld that many plaintiffs attorneys inhabit these days would ethics and integrity be considered subjective criteria to be avoided in making hiring or promotions.

Decentralization alone isnt enough to prove company-wide discrimination, so the plaintiffs team also argues, contradictorily, that Wal-Mart has a strong corporate culture that sends subtle messages to managers not to promote women. To gin up this argument the lawyers rely on anything they can get their hands on that purportedly shows that Wal-Marts culture is hostile to women, including the fact that Sam Walton used to take his top managers quail hunting once a yearan activity, the suit contends, that men are more comfortable with than women.

The plaintiffs also employ statistical analysis in an attempt to show company-wide discrimination patterns, claiming for instance that Wal-Marts percentage of female managers is far lower than its percentage of female hourly employees. Wal-Mart counters by pointing out that women apply for management posts at a lower rate than men, and that the company actually promotes its female applicants for managerial jobs at a higher rate than it promotes male applicants. If simple logic applied in civil courts today, that would be the end of the discussion. But in the emotionally charged world of discrimination lawsuits, where banks are accused of redlining if their loans dont reflect the demographic makeup of the population (regardless of the lack of creditworthy candidates in some neighborhoods, or other inconvenient facts), Wal-Mart can be considered guilty simply because its numbers dont meet some arbitrary standard.

With such a flimsy case presented by the plaintiffs, the judge would have had to bend over backward to accept this as a class action, and thats just what he did. He admits the contradiction in describing a corporate system as both excessively subjective and at the same time centralized, but like some acrobat on a high wire he argues that theres just enough subjectivity in Wal-Mart potentially to create bias, but just enough central control possibly to justify a corporate pattern. Solomonic even-handedness this isnt.

The judge also credulously accepts the most subjective expert testimony provided by the plaintiffs on the issue of Wal-Marts corporate culture. He cites the testimony of University of California sociologist William Bielby, who reviewed the companys diversity policies and found them wanting, because Wal-Mart has never performed any survey addressing gender or diversity issues. In other words, its not enough in todays workplace to hire and promote based on the qualifications and achievement of your employees; a company is potentially guilty of discrimination for not taking surveys of gender issues. Reading the judges section based on this kind of voodoo sociology should put fear into the hearts of any company unlucky enough to come before him on employment matters.

That the case against Wal-Mart is so flimsy isnt surprising. Since it became the largest company in America, Wal-Mart has also emerged as the most sued company. Trial lawyers have set their sights on Wal-Marts deep pockets and are aided by the numerous unions and Left-wing advocacy groups, whose barrage of negative publicity about the company aims to force it to unionize and to soften up public opinion for a big payoff in court in cases like this. These groups have waged war on Wal-Mart because the companys widely praised technological and management innovations have helped create a productivity revolution that has threatened organized labor in many markets and challenged some of the economic orthodoxies of the Left. Increasingly, this coalition has argued to a credulous press that Wal-Marts focus on low prices and high employee productivity imposes a high cost upon the economy, and lawsuits like the current one can only succeed if these groups persuade enough Americans that something insidious is at work in offering a vast range of products at low prices to middle-American consumers.

But the first red flag in the discrimination case should be the legal team itself. Spearheading the case is a lineup that has become typical in employment suits against major companies these days: an alliance between a noted (critics would say notorious) plaintiffs firm specializing in employment lawCohen, Milsteinand nonprofit, left-wing advocacy law projects like The Impact Fund. This kind of combination has proven effective, because the plaintiffs firm can supply the litigation muscle needed to carry forth a suit like this over the years, while the legal foundationsvery heavily supported by contributions from Cohen, Milstein itself and other trial firmssupply the patina of supposedly disinterested respectability and public service that magically turns these into historic cases with supposedly redeeming social value.

Indeed, Cohen, Milstein needs just such respectable company if it is to appear as a defender of the little guy or gal. This, after all, is the firm that began the uproar over supposed discrimination at Texaco by releasing transcripts of tapes purportedly showing that the oil companys executives made disparaging remarks about minorities, only to have it revealed much later (after Cohen, Milstein walked off with a huge settlement) that the tapes had been erroneously transcribed and the Texaco execs had made no such statements.

Unfortunately, the only thing historic about the fact that this case has gotten even this far is that it represents yet another step in the debasement of employment law in the U.S.

Steven Malanga is contributing editor of City Journal, from whose forthcoming issue this is adapted.